07.29.15
$3 Billion
KEY EXECUTIVES:
Dow R. Wilson, President and CEO
Jessica Denecour, Sr. VP and Chief Information Officer
Elisha W. Finney, Executive VP, Finance and Chief Financial Officer
Patrick Joda, VP and General Manager of Oncology Systems Customer Support Services
Moataz Karmalawy, Ph.D., VP and General Manager, Worldwide Particle Therapy
Kolleen Kennedy, Executive VP, Oncology Systems
John W. Kuo, Sr. VP, General Counsel and Corporate Secretary
Franco N. Palomba, Sr. VP, Finance and Treasurer
Sunny Sanyal, Sr. VP and President, Imaging Components Businesses
Spencer R. Sias, VP, Corporate Communications and Investor Relations
Vy H. Tran, J.D., Sr. VP, Regulatory Affairs and Quality Assurance
Clarence Verhoef, Sr. VP, Finance and Controller
George A. Zdasiuk, Sr. VP, Ginzton Technology Center
NO. OF EMPLOYEES: 6,200
GLOBAL HEADQUARTERS: Palo Alto, Calif.
Varian Medical Systems Inc. made it into the Top 30 (at number 30) in MPO’s June 2012 issue, for its $2.6 billion dollar FY11. Unfortunately, the radiation oncology technology company has been absent for two years in a row—but at $3 billion in revenues, FY14 has brought the company back into the Top 30 fold.
Behind the company’s successful year are two secret weapons: Its particle therapy business and the Ginzton Technology Center (GTC). Headquartered in Mountain View, California, with a staff of about 45, the GTC serves as Varian Medical Systems’ central research and development organization, incubating new technologies, supporting product development for the company’s business units, and conducting government or industry-sponsored research projects. Its mandate is to investigate the development of new, disruptive breakout technologies that fit within Varian’s other existing businesses (oncology and imaging components).
Varian’s particle therapy business makes targeted proton beam technology that treats cancerous cells. Together, particle therapy and the GTC are grouped under Varian’s “other” business (oncology and imaging components being the company’s main two business units), but they did very well for Varian in the last quarter of 2014, bringing in $22 million, 30 percent more than the businesses did in the same quarter in 2013.
However, at $45 million, the full fiscal year revenue for these two businesses was actually down 6 percent from the whole-year revenue in 2013. But gross orders for the company’s proton therapy were up in 2014 (year ended Sept. 30), because a grand total of zero orders were received in 2013. Therefore, the proton therapy business brought a gross of $120 million in FY 2014, which bodes well for the future of the business once operating expenses settle down.
“Fiscal 2014 was a year of investment aimed to stimulate long-term, top-line growth for the company and we have made good progress,” explained President and CEO Dow R. Wilson. “We’re focusing now on restoring our more normal operating expense levels to maintain margins and improve earnings growth. In the first quarter of fiscal 2015, we expect to take a restructuring charge of an estimated $13 million or $0.09 per diluted share to realign and reduce our staff levels through programs, including an enhanced retirement plan.”
Wilson also said that Varian is “aiming to build a profitable $300 million annual proton business within the next few years.”
Early in 2014, Scripps Health, an internationally regarded healthcare system based in San Diego, Calif., established the Scripps Proton Center, the first ever fully equipped Varian proton center. This marks the first of many expected such sites, with upcoming centers planned in Cincinnati, Ohio; Russia; Saudi Arabia and Taiwan.
The company, however, is being realistic about what lays in store for proton therapy. Potential customers are government-sponsored hospitals and research institutions and research universities, which typically purchase products through public tenders, as well as private hospitals, clinics and private developers—and until now, Varian has been selling its proton therapy systems through direct sales specialist representatives who collaborate with the company’s oncology systems sales group. First, the company predicts, growth in this developing market will occur mainly in the major metropolitan areas in the United States and abroad, driven by institutions that wish to expand their clinical offerings and increase their profile in their respective communities.
Varian is investing “substantial resources” to build this new business. Proton therapy facilities, such as the one opened by Scripps, are large-scale construction projects that are time consuming and involve significant customer investment and often complex project financing. Consequently, this business is vulnerable to general economic and market conditions, as well as the inescapable problem of reimbursement rates. Customer decision-making cycles tend to be very long, company officials note, and orders generally involve many contingencies. Tight credit markets constrain the ability of proton therapy projects to obtain financing, as well.
During the conference call for FY14 financial results, a number of analysts challenged the executive team on its outlook for the growth of proton therapy in 2015, citing the shuttering of a (non-Varian) proton therapy center in Indiana. Wilson noted, “It was one of first proton centers in the United States. It was older technology, generations behind. It’s in a tough location. It’s … one hour plus outside Indianapolis, not in a big location, has a small catchment area. They did good work, primarily research. And if you saw the report, it was very costly for them to modernize in that location. So we feel very good about the partners that we’re dealing with. Clearly, the cost of protons is expensive, and we have to work on that together to bring it down. But the clinical advantages of protons look very, very positive.”
Not to fear, however—so far, FY15 has seen Varian selected to equip proton therapy centers in Denmark, England and the Netherlands, and the company also contributed to financing the new Maryland Proton Therapy Center. The center committed to an $87 million order in 2015, as well as a 10-year service agreement valued at approximately $65 million.
Speaking of growth, Varian put its money where its mouth is in FY2014. Sending a clear message that it’s serious about long-term growth strategies, it acquired outside technology, assets from two companies, and expanded its Utah operations in a major way. In January 2014, Varian signed an agreement with the United Kingdom’s National Health Service (NHS) to buy an NHS-developed cancer care planning tool called the Radiation oncology Planning Online Resource Tool (R-PORT). The intent was to offer R-PORT to oncology departments globally. Then in April, Varian completed the acquisition of certain assets of Velocity Medical Solutions LLC, an Atlanta, Ga.-based developer of specialized software for cancer clinics. Then in August, Varian acquired certain assets of Gig Harbor, Wash.-based Transpire Inc., including the Acuros dose calculation software that has been integrated into Varian’s Brachyvision and Eclipse treatment planning software products.
The Utah expansion was announced in January, and the project broke ground in August just under the line for the end of the fiscal year in September. The company’s existing Salt Lake City operation is predicted to expand to create 1,000 more full time jobs over the next 20 years.
The company received an impressive total of three new 510(k) clearances from the U.S. Food and Drug Administration (FDA) in FY14. While it did not receive major regulatory green lights from foreign markets, the company did establish a presence with either proton therapy or oncology treatment equipment in countries including Scotland, Taiwan and India. The first FDA clearance was received right at the beginning of the fiscal year in October 2013. Rapidplan, a radiotherapy treatment planning tool designed to enhance quality, consistency, and efficiency in radiotherapy treatment planning, was cleared to kick off the year. According to the company, the tool provides clinics with knowledge-based models that generate high-quality personalized treatment plans for their patients. Then in January 2014, Varian received clearance for the updated version of its Probeam proton therapy system. The system is designed to give clinicians options for delivering doses precisely in order to minimize the dose to healthy tissue in the course of delivering proton therapy treatments for cancer. In July, FDA cleared Varian’s Calypso soft tissue Beacon transponder, designed to aid the precision of radiotherapy and radiosurgery treatments for cancer. The transponder is approximately the size of a grain of rice and can be implanted into soft tissue anywhere in the body except the lungs. The Calypso GPS for the Body system can then continuously track and monitor the position of the transponders, so the high energy treatment beams precisely can be aimed to minimize exposure of surrounding healthy tissues. An earlier version of the Calypso Beacon transponder was cleared for use specifically in the prostate and prostatic bed; the new clearance made the system applicable for many other types of cancer.
There were two personnel movements of note during FY14. In February, Robert H. Kluge retired from his role as senior vice president and president of the company’s imaging components businesses. Former CEO of ER documentation and coding software and services company T-System Inc., Sunny Sanyal, succeeded Kluge. Varian’s imaging components businesses are comprised of the X-ray products and security and inspection products businesses. Also in February, Board Chairman Richard M. Levy retired from his position. Levy had served as chairman for 12 years, and also was CEO of Varian from 1999-2006. He was succeeded by R. Andrew Eckert, who was, at the time, CEO of CRC Health Corporation.
Fiscal year 2014 also was the year in which old ghosts came back to haunt the company—in April, Varian settled a years-long patent lawsuit brought against them by the University of Pittsburgh, Pa. The result was a $35 million hit in the company’s second and third quarters. The University initiated a patent infringement lawsuit against Varian in 2007 regarding the company’s Real-time Position Management technology, which is used to account for breathing motion during delivery of radiation therapy. In 2012, the United States District Court for the Western District of Pennsylvania ruled against Varian, ordering payment of approximately $102 million. Varian challenged that ruling in the United States Court of Appeals for the Federal Circuit, and ultimately was able to reach a settlement agreement with the school.
KEY EXECUTIVES:
Dow R. Wilson, President and CEO
Jessica Denecour, Sr. VP and Chief Information Officer
Elisha W. Finney, Executive VP, Finance and Chief Financial Officer
Patrick Joda, VP and General Manager of Oncology Systems Customer Support Services
Moataz Karmalawy, Ph.D., VP and General Manager, Worldwide Particle Therapy
Kolleen Kennedy, Executive VP, Oncology Systems
John W. Kuo, Sr. VP, General Counsel and Corporate Secretary
Franco N. Palomba, Sr. VP, Finance and Treasurer
Sunny Sanyal, Sr. VP and President, Imaging Components Businesses
Spencer R. Sias, VP, Corporate Communications and Investor Relations
Vy H. Tran, J.D., Sr. VP, Regulatory Affairs and Quality Assurance
Clarence Verhoef, Sr. VP, Finance and Controller
George A. Zdasiuk, Sr. VP, Ginzton Technology Center
NO. OF EMPLOYEES: 6,200
GLOBAL HEADQUARTERS: Palo Alto, Calif.
Varian Medical Systems Inc. made it into the Top 30 (at number 30) in MPO’s June 2012 issue, for its $2.6 billion dollar FY11. Unfortunately, the radiation oncology technology company has been absent for two years in a row—but at $3 billion in revenues, FY14 has brought the company back into the Top 30 fold.
Behind the company’s successful year are two secret weapons: Its particle therapy business and the Ginzton Technology Center (GTC). Headquartered in Mountain View, California, with a staff of about 45, the GTC serves as Varian Medical Systems’ central research and development organization, incubating new technologies, supporting product development for the company’s business units, and conducting government or industry-sponsored research projects. Its mandate is to investigate the development of new, disruptive breakout technologies that fit within Varian’s other existing businesses (oncology and imaging components).
Varian’s particle therapy business makes targeted proton beam technology that treats cancerous cells. Together, particle therapy and the GTC are grouped under Varian’s “other” business (oncology and imaging components being the company’s main two business units), but they did very well for Varian in the last quarter of 2014, bringing in $22 million, 30 percent more than the businesses did in the same quarter in 2013.
However, at $45 million, the full fiscal year revenue for these two businesses was actually down 6 percent from the whole-year revenue in 2013. But gross orders for the company’s proton therapy were up in 2014 (year ended Sept. 30), because a grand total of zero orders were received in 2013. Therefore, the proton therapy business brought a gross of $120 million in FY 2014, which bodes well for the future of the business once operating expenses settle down.
“Fiscal 2014 was a year of investment aimed to stimulate long-term, top-line growth for the company and we have made good progress,” explained President and CEO Dow R. Wilson. “We’re focusing now on restoring our more normal operating expense levels to maintain margins and improve earnings growth. In the first quarter of fiscal 2015, we expect to take a restructuring charge of an estimated $13 million or $0.09 per diluted share to realign and reduce our staff levels through programs, including an enhanced retirement plan.”
Wilson also said that Varian is “aiming to build a profitable $300 million annual proton business within the next few years.”
Early in 2014, Scripps Health, an internationally regarded healthcare system based in San Diego, Calif., established the Scripps Proton Center, the first ever fully equipped Varian proton center. This marks the first of many expected such sites, with upcoming centers planned in Cincinnati, Ohio; Russia; Saudi Arabia and Taiwan.
The company, however, is being realistic about what lays in store for proton therapy. Potential customers are government-sponsored hospitals and research institutions and research universities, which typically purchase products through public tenders, as well as private hospitals, clinics and private developers—and until now, Varian has been selling its proton therapy systems through direct sales specialist representatives who collaborate with the company’s oncology systems sales group. First, the company predicts, growth in this developing market will occur mainly in the major metropolitan areas in the United States and abroad, driven by institutions that wish to expand their clinical offerings and increase their profile in their respective communities.
Varian is investing “substantial resources” to build this new business. Proton therapy facilities, such as the one opened by Scripps, are large-scale construction projects that are time consuming and involve significant customer investment and often complex project financing. Consequently, this business is vulnerable to general economic and market conditions, as well as the inescapable problem of reimbursement rates. Customer decision-making cycles tend to be very long, company officials note, and orders generally involve many contingencies. Tight credit markets constrain the ability of proton therapy projects to obtain financing, as well.
During the conference call for FY14 financial results, a number of analysts challenged the executive team on its outlook for the growth of proton therapy in 2015, citing the shuttering of a (non-Varian) proton therapy center in Indiana. Wilson noted, “It was one of first proton centers in the United States. It was older technology, generations behind. It’s in a tough location. It’s … one hour plus outside Indianapolis, not in a big location, has a small catchment area. They did good work, primarily research. And if you saw the report, it was very costly for them to modernize in that location. So we feel very good about the partners that we’re dealing with. Clearly, the cost of protons is expensive, and we have to work on that together to bring it down. But the clinical advantages of protons look very, very positive.”
Not to fear, however—so far, FY15 has seen Varian selected to equip proton therapy centers in Denmark, England and the Netherlands, and the company also contributed to financing the new Maryland Proton Therapy Center. The center committed to an $87 million order in 2015, as well as a 10-year service agreement valued at approximately $65 million.
Speaking of growth, Varian put its money where its mouth is in FY2014. Sending a clear message that it’s serious about long-term growth strategies, it acquired outside technology, assets from two companies, and expanded its Utah operations in a major way. In January 2014, Varian signed an agreement with the United Kingdom’s National Health Service (NHS) to buy an NHS-developed cancer care planning tool called the Radiation oncology Planning Online Resource Tool (R-PORT). The intent was to offer R-PORT to oncology departments globally. Then in April, Varian completed the acquisition of certain assets of Velocity Medical Solutions LLC, an Atlanta, Ga.-based developer of specialized software for cancer clinics. Then in August, Varian acquired certain assets of Gig Harbor, Wash.-based Transpire Inc., including the Acuros dose calculation software that has been integrated into Varian’s Brachyvision and Eclipse treatment planning software products.
The Utah expansion was announced in January, and the project broke ground in August just under the line for the end of the fiscal year in September. The company’s existing Salt Lake City operation is predicted to expand to create 1,000 more full time jobs over the next 20 years.
The company received an impressive total of three new 510(k) clearances from the U.S. Food and Drug Administration (FDA) in FY14. While it did not receive major regulatory green lights from foreign markets, the company did establish a presence with either proton therapy or oncology treatment equipment in countries including Scotland, Taiwan and India. The first FDA clearance was received right at the beginning of the fiscal year in October 2013. Rapidplan, a radiotherapy treatment planning tool designed to enhance quality, consistency, and efficiency in radiotherapy treatment planning, was cleared to kick off the year. According to the company, the tool provides clinics with knowledge-based models that generate high-quality personalized treatment plans for their patients. Then in January 2014, Varian received clearance for the updated version of its Probeam proton therapy system. The system is designed to give clinicians options for delivering doses precisely in order to minimize the dose to healthy tissue in the course of delivering proton therapy treatments for cancer. In July, FDA cleared Varian’s Calypso soft tissue Beacon transponder, designed to aid the precision of radiotherapy and radiosurgery treatments for cancer. The transponder is approximately the size of a grain of rice and can be implanted into soft tissue anywhere in the body except the lungs. The Calypso GPS for the Body system can then continuously track and monitor the position of the transponders, so the high energy treatment beams precisely can be aimed to minimize exposure of surrounding healthy tissues. An earlier version of the Calypso Beacon transponder was cleared for use specifically in the prostate and prostatic bed; the new clearance made the system applicable for many other types of cancer.
There were two personnel movements of note during FY14. In February, Robert H. Kluge retired from his role as senior vice president and president of the company’s imaging components businesses. Former CEO of ER documentation and coding software and services company T-System Inc., Sunny Sanyal, succeeded Kluge. Varian’s imaging components businesses are comprised of the X-ray products and security and inspection products businesses. Also in February, Board Chairman Richard M. Levy retired from his position. Levy had served as chairman for 12 years, and also was CEO of Varian from 1999-2006. He was succeeded by R. Andrew Eckert, who was, at the time, CEO of CRC Health Corporation.
Fiscal year 2014 also was the year in which old ghosts came back to haunt the company—in April, Varian settled a years-long patent lawsuit brought against them by the University of Pittsburgh, Pa. The result was a $35 million hit in the company’s second and third quarters. The University initiated a patent infringement lawsuit against Varian in 2007 regarding the company’s Real-time Position Management technology, which is used to account for breathing motion during delivery of radiation therapy. In 2012, the United States District Court for the Western District of Pennsylvania ruled against Varian, ordering payment of approximately $102 million. Varian challenged that ruling in the United States Court of Appeals for the Federal Circuit, and ultimately was able to reach a settlement agreement with the school.